Mastercard Incorporated DCF Valuation: Is The Stock Undervalued?


Image Source: PixabayEach week, we conduct a brief analysis on one of the companies in our screens. This week, we thought we’d take a look at a stock that is not currently in our screens, Mastercard Inc (MA).

Profile
Mastercard is the second-largest payment processor in the world, having processed close to over $9 trillion in volume during 2023. Mastercard operates in over 200 countries and processes transactions in over 150 currencies.

Recent Performance
Over the past twelve months, the share price has moved up 15.97%. Image Source: Google Finance

Inputs

  • Discount Rate: 9%
  • Terminal Growth Rate: 2%
  • WACC: 9%
  • Forecasted Free Cash Flows (FCFs)


    Terminal Value

  • Terminal Value = FCF * (1 + g) / (r – g) = 278.46 billion
  • Present Value of Terminal Value

  • PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 180.98 billion
  • Present Value of Free Cash Flows

  • Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 59.72 billion
  • Enterprise Value

  • Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 240.70 billion
  • Net Debt

  • Net Debt = Total Debt – Total Cash = 7.97 billion
  • Equity Value

  • Equity Value = Enterprise Value – Net Debt = 232.73 billion
  • Per-Share DCF Value

  • Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $248.91
  • Conclusion
    Based on the DCF valuation, the stock is overvalued. The DCF value of $248.91 share is lower than the current market price of $441.16. The Margin of Safety is -77.88%.More By This Author:Large-Cap Stocks In Trouble: Here Are The 10 Worst Performers Over The Past 12 Months – Sunday, June 23
    Visa Inc DCF Valuation: Is The Stock Undervalued?
    Stock Screener Analysis: Why Andersons Inc. Stock Is A Buy

    Reviews

    • Total Score 0%
    User rating: 0.00% ( 0
    votes )



    Leave a Reply

    Your email address will not be published. Required fields are marked *